News media people, often plagued
with little understanding, fail miserably in their duty to inform the public.
This is particularly evident in their reporting on the current financial
meltdown, suggesting it was caused by deregulation and free markets.

Professor David Henderson,
research fellow at Stanford's Hoover Institution, writes about regulation in
"Are We Ailing From Too Much Deregulation?" in Cato Policy Report
(November/December 2008). The Federal Register, which lists new regulations,
annually averaged 72,844 pages between 1977 and 1980. During the Reagan years,
the average fell to 54,335. During the Bush I years, they rose to 59,527, to
71,590 during the Clinton years and rose to a record of 75,526 during the Bush
II years. Employees in government regulatory agencies grew from 146,139 in 1980
to 238,351 in 2007, a 63 percent increase. In the banking and finance
industries, regulatory spending between 1980 and 2007 almost tripled, rising
from $725 million to $2.07 billion. So here's my question: What are we to make
of congressmen, talking heads and news media people who tell us the financial
meltdown is a result of deregulation and free markets? Are they ignorant,
stupid or venal?

A New York Times article,
"Fannie Mae Eases Credit To Aid Mortgage Lending" (9/30/99),
reported, "Fannie Mae, the nation's biggest underwriter of home mortgages,
has been under increasing pressure from the Clinton Administration to expand
mortgage loans among low and moderate income people …" The pressure was
the 1977 Community Reinvestment Act that was beefed up during the Clinton
Administration. It required banks to make high-risk loans they would not have
otherwise made. Failure to comply meant fines and difficulty in getting
approval for mergers and branch expansion.

When questions began to arise
about government policy that intimidated lenders into making high-risk loans,
we received congressional assurances. At hearings investigating the solvency of
Fannie Mae and Freddie Mac, Rep. Barney Frank said, ''The more people
exaggerate these problems, the more pressure there is on these companies, the
less we will see in terms of affordable housing.'' In a speech to the Mortgage
Bankers Association, Frank advised, "People tend to pay their mortgages. I
don't think we are in any remote danger here. This focus on receivership, I
think, is intended to create fears that aren't there." Protesting against
greater controls against lax mortgage lending, Sen. Harry Reid said,
"While I favor improving oversight by our federal housing regulators to
ensure safety and soundness, we cannot pass legislation that could limit
Americans from owning homes and potentially harm our economy in the
process."

One-third of the $15 trillion of
mortgages in existence in 2008 are owned, or securitized by Fannie Mae, Freddie
Mac, Ginnie Mae, the Federal Housing and the Veterans Administration. Wall
Street buyers of repackaged loans didn't mind buying risky paper because they
assumed that they would be guaranteed by the federal government: read bailout
from the taxpayers. Today's housing mess can be laid directly at the feet of
Congress and the White House.

Congress and the White House
aren't finished with the taxpayers yet. Once a bailout parade gets started, it
has a momentum of its own. President Bush, citing danger to the economy, signed
a $17 billion bailout for the auto industry. According to the Wall Street
Journal article "Shovel-Ready on Campus" (December 17, 2008),
presidents of 36 state government universities have called for bailouts; they
call it a "federal infusion of capital." Soon, if not already, state
governors and city mayors will descend on Washington seeking bailouts.
California is $15 billion in the hole, Florida $5 billion and things are so bad
in Michigan that the governor has shut down one prison to save money.

What kind of assumptions do
politicians and news media make about the intelligence of Americans to expect
us to buy the idea that our current mess results from deregulation and free
markets? I do not find that assumption flattering.

Walter E. Williams is a
professor of economics at George Mason University. To find out more about
Walter E. Williams and read features by other Creators Syndicate writers and
cartoonists, visit the Creators Syndicate Web page at www.creators.com.